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Thursday, December 3, 2009

HDFC Move Too Little, Too Late Against SBI & ICICI?

HDFC Ltd, India's largest home loan provider, and the key promoter of HDFC Bank, has done something to counter SBI, but it might prove to be too little, too late. The dual rate home loan scheme comes with a fixed rate of 8.25 per cent till March 31, 2012 for a 20 year loan of 30 lakh for new customers who apply till January 31. Though 0.25% above SBI's during the first year, the scheme is comparable to SBI's when taking into account the first three years. But it is still inferior in its 0.5% processing fee against SBI's nil charges.

HDFC Bank always had to be content with the No.3 position, behind SBI and ICICI Bank. But the solace was always that it could lead in two retail segments – home and auto loans. But now, even that edge is showing signs of distress.

While SBI has recently caught up with HDFC Bank in both home and auto loan growth, ICICI Bank has also made a dramatic comeback. To counter, HDFC Bank is relying more and more on growing their overall retail loan business, instead of trying to grow their corporate loans, where the competition is even tougher with the likes of PNB & BoB, apart from SBI & ICICI Bank.

The bank’s over reliance on retail segments like credit cards is troubling, and as Pralay Mondal, their Country Head for Retail & Credit Cards had recently put it, the delinquency for the credit card industry as a whole is at 30-35%.

HDFC Bank’s key problems are its highly pressured workforce and the private bank’s too selective, too restrictive home loan policies that pre-empt a significant percentage of homebuyers from a life-critical home loan.